Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x
No o

Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files). Yes o No x

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company x

Emerging growth company x

If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
o

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o
No x

State the number of shares outstanding of each of the issuer's
classes of common equity, for the period covered by this report and as at the latest practicable date:

At May 1, 2017 we had
66,760,110 shares of common stock outstanding.

ADAMANT DRI PROCESSING AND MINERALS GROUP

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

1

Consolidated Balance Sheets as of March 31, 2017 (Unaudited) and December 31, 2016

1

Consolidated Statements of Operations and Other Comprehensive Loss for the Three Months Ended March 31, 2017 and 2016 (Unaudited)

2

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 and 2016 (Unaudited)

3

Notes to Consolidated Financial Statements

4

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 4. Controls and Procedures

29

PART II

OTHER INFORMATION

Item 1A. Risk Factors

29

Item 6. Exhibits

30

Signatures

30

Special Note Regarding Forward Looking Statements

This report contains forward-looking statements. The forward-looking
statements are contained principally in the section entitled “Management's Discussion and Analysis of Financial Condition
and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors which may cause
our actual results, performance or achievements to be materially different from any future results, performances or achievements
expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such
as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,”
“may,” “plans,” “potential,” “predicts,” “projects,” “should,”
“would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect
our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these
uncertainties, you should not place undue reliance on these forward-looking statements.

Also, forward-looking statements represent our estimates and
assumptions only as of the date of this report. You should read this report and the documents that we reference and filed as exhibits
to this report completely and with the understanding that our actual future results may be materially different from what we expect.
Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons
actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes
available in the future.

Adamant DRI Processing
and Minerals Group (“Adamant’ or “the Company” or “Group”), is a Nevada corporation incorporated in
July 2014 and successor by merger to UHF Incorporated, a Delaware corporation (“UHF”).

The Company produces
Direct Reduced Iron (“DRI”) using advanced reduction rotary kiln technology with iron ore as the principal raw material.
‘Reduced Iron’ derives its name from the chemical change that iron ore undergoes when it is heated in a furnace at
high temperatures in the presence of hydrocarbon-rich gasses. ‘Direct reduction’ refers to processes which reduce
iron oxides to metallic iron below the melting point of iron.

UHF was the successor
to UHF Incorporated, a Michigan corporation (“UHF Michigan”), as a result of domicile merger effected on December 29,
2011.

On June 30, 2014,
UHF entered into and closed a share exchange agreement, or the Target Share Exchange Agreement, with Target Acquisitions I, Inc.,
a Delaware corporation (“Target”), and the stockholders of Target (the “Target Stockholders”), pursuant
to which UHF acquired 100% of the issued and outstanding capital stock of Target for 43,375,638 shares of UHF’s common stock
and one share of UHF’s series A convertible preferred stock, convertible into an additional 17,839,800 shares of common stock. Since
UHF’s certificate of incorporation only authorized the issuance of 50,000,000 shares of common stock, UHF did not have
sufficient authorized but unissued shares of common stock to complete the acquisition of Target, so the Board of Directors authorized
the issuance to one of the Target Stockholders one share of series A convertible preferred stock convertible into 17,839,800 shares
of common stock at such time as UHF amended its certificate of incorporation to increase the number of authorized shares of common
stock or merged with and into another corporation which had sufficient shares of authorized but unissued shares of common stock
for issuance upon conversion. Following the closing of the share exchange, UHF had outstanding 45,920,310 shares of common
stock and one share of series A convertible preferred stock, which was converted into 17,839,800 common shares on August 29, 2014.

For accounting
purposes, the share exchange transaction with Target and the Target Stockholders was treated as a reverse acquisition, with Target
as the acquirer and UHF as the acquired party. The shares issued to Target’s shareholders were accounted for
as a recapitalization of Target and were retroactively restated for the periods presented because after the share exchange, Target’s
shareholders owned the majority of UHF’s outstanding shares and exercised significant influence over the operating and
financial policies of the consolidated entity, and UHF was a non-operating shell with nominal net assets prior to the acquisition.
Pursuant to Securities and Exchange Commission (“SEC”) rules, this is considered a capital transaction in substance,
rather than a business combination.

On July 4, 2014,
the Company entered into an Agreement and Plan of Merger with UHF, pursuant to which UHF merged with and into Adamant with
Adamant as the surviving entity (the “Merger”), as a result of which each outstanding share of common stock of UHF
at the effective time of the Merger was converted into one share of the common stock of Adamant, and the outstanding share
of series A Preferred Stock was converted into 17,839,800 shares of common stock. The Merger was effected on August 29, 2014.

As a result of
the acquisition of Target and UHF, the Company now owns all of the issued and outstanding capital stock of Real Fortune BVI, which
in turn owns all of the issued and outstanding capital stock of Real Fortune Holdings Limited, a Hong Kong limited company (“Real
Fortune HK”), which in turn owns all of the issued and outstanding capital stock of Zhangjiakou Tongda Mining Technologies
Service Co., Ltd. (“China Tongda”), a Chinese limited company.

The Company operates in
China through Zhuolu Jinxin Mining Co., Ltd. (“China Jinxin”), the Company’s variable interest entity which the
Company controls through a series of agreements between China Jinxin and China Tongda and, as of January 24, 2014, owned Haixing
Huaxin Mining Industry Co., Ltd. (“China Huaxin”) which is owned by China Tongda. The Group’s current structure
is as follows:

China Jinxin is
an early stage mining company which processes iron ore at its production facility in Hebei Province. China Jinxin currently does
not own any mines or hold any mining rights. In 2015, management determined to further upgrade the facility to enable it to
produce DRI due to increased demand for DRI products in China; accordingly, China Jinxin will produce DRI at its facility. Through
contractual arrangements among China Tongda and China Jinxin, and its shareholders, the Company controls China Jinxin’s operations
and financial affairs. As a result of these agreements, China Tongda is considered the primary beneficiary of China Jinxin (see
Note 2) and accordingly, China Jinxin’s results of operations and financial condition are consolidated in the Group’s
financial statements. All issued and outstanding shares of China Jinxin are held by 15 Chinese citizens.

On January 17,
2014, the Company entered into a series of substantially identical agreements with five shareholders of Haixing Huaxin Mining Industry
Co., Ltd. (“China Huaxin”) pursuant to which the Company acquired 100% of the outstanding shares of China Huaxin. The
consideration paid to the shareholders of China Huaxin for their interests consisted of cash of RMB 10 million ($1.64 million)
and 5.1 million shares of the Company’s common stock, valued at $0.014 per share ($71,400).

China Tongda,
the Company’s wholly-owned Chinese subsidiary, filed a notice of transfer with respect to the change of ownership of China
Huaxin with the local company registration authority which was approved on January 23, 2014.

China Huaxin was
established in August 2010 and is located in Haixing Qingxian Industrial Park, Cangzhou, Hebei Province PRC. China Huaxin
is engaged in producing and selling DRI. Prior to 2015, China Huaxin conducted no business activities other than construction
of its DRI production facility. Construction of the DRI Facility was completed, and China Huaxin completed trial production
and expected to commence commercial production in May 2015. However, as a result of environmental initiatives by national, provincial
and local government authorities in China, starting in June 2015, China Huaxin began upgrading the DRI facilities by converting
the existing coal-gas station systems to liquefied natural gas (“LNG”) station systems. The conversion
to LNG systems will reduce pollutants and produce higher quality DRIs with less impurities. China Huaxin completed the upgrading
and resumed trial production from its upgraded DRI facilities, China Huaxin is currently doing equipment debugging and adjustment,
and expects the official production to resume in mid-2017.

The consolidated
interim financial information as of March 31, 2017 and for the three month periods ended March 31, 2017 and 2016 was prepared without
audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, which are normally included
in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States
of America (“US GAAP”) was not included. The interim consolidated financial information should be read in conjunction
with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2016, previously filed with the SEC. In the opinion of management, all adjustments (which include normal
recurring adjustments) necessary to present a fair statement of the Company’s consolidated financial position as of March
31, 2017, results of operations and cash flows for the three months ended March 31, 2017 and 2016, as applicable, were made. The
interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.

2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Basis of Presentation

The accompanying
Consolidated Financial Statements (“CFS”) are prepared in conformity with US GAAP. Adamant, Real Fortune BVI and Real
Fortune HK’s functional currency is the US Dollar (‘‘USD’’ or “$”), and China Tongda,
China Jinxin and China Huaxin’s functional currency is Chinese Renminbi (‘‘RMB’’). The accompanying
CFS are translated from functional currencies and presented in USD.

Principles
of Consolidation

The CFS include
the financial statements of the Company, its subsidiaries and its VIE (China Jinxin) for which the Company’s subsidiary China
Tongda is the primary beneficiary; and China Tongda’s 100% owned subsidiary China Huaxin. All transactions and balances among
the Company, its subsidiaries and VIE are eliminated in consolidation.

The Company follows the
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 which
requires a VIE to be consolidated by a company if that company is subject to a majority of the risk of loss from the VIE or is
entitled to a majority of the VIE’s residual returns. In determining China Jinxin to be the VIE of China Tongda,
the Company considered the following indicators, among others:

China Tongda has
the right to control and administer the financial affairs and operations of China Jinxin and to manage and control all assets of
China Jinxin. The equity holders of China Jinxin as a group have no right to make any decision about China Jinxin’s activities
without the consent of China Tongda. China Tongda will be paid quarterly, management consulting and technical support fees equal
to all pre-tax profits, if any, of that quarter. If there are no earnings before taxes and other cash expenses, during any quarter, no
fee shall be paid. If China Jinxin sustains losses, they will be carried to the next period and deducted from the next service
fee. China Jinxin has the right to require China Tongda to pay China Jinxin the amount of any loss incurred by China Jinxin.

The shareholders
of China Jinxin pledged their equity interests in China Jinxin to China Tongda to guarantee China Jinxin’s performance of
its obligations under the Management Entrustment and Option Agreements. If either China Jinxin or its equity owners is
in breach of the Equity Pledge or Exclusive Purchase Option Agreements, then China Tongda is entitled to require the equity
owners of China Jinxin to transfer their equity interests in China Jinxin to it.

The shareholders
of China Jinxin irrevocably granted China Tongda or its designated person an exclusive option to acquire, at any time, all of the
assets or outstanding shares of China Jinxin, to the extent permitted by PRC law. The purchase price for the shareholders’
equity interests in China Jinxin shall be the lower of (i) the actual registered capital of China Jinxin or (ii) RMB 500,000 ($74,000),
unless an appraisal is required by the laws of China.

Each shareholder
of China Jinxin executed an irrevocable power of attorney to appoint China Tongda as its attorney-in-fact to exercise all of its
rights as equity owner of China Jinxin, including 1) attend the shareholders’ meetings of China Jinxin and/or sign the relevant
resolutions; 2) exercise all the shareholder's rights and shareholder's voting rights that the shareholder is entitled to under
the laws of the PRC and the Articles of Association of China Jinxin, including but not limited to the sale or transfer or pledge
or disposition of the shares in part or in whole; 3) designate and appoint the legal representative, Chairman of the Board of Directors
(“BOD”), Directors, Supervisors, the Chief Executive Officer, Financial Officer and other senior management members
of China Jinxin; and 4) execute the relevant share purchases and other terms stipulated in the Exclusive Purchase Option and Share
Pledge Agreements.

However, the VIE
is monitored by the Company to determine if any events have occurred that could cause its primary beneficiary status to change.
These events include whether:

a.

China Jinxin's governing documents or contractual arrangements are changed in a manner that changes the characteristics or adequacy of China Tongda's equity investment at risk.

b.

The equity investment in China Jinxin or some part thereof is returned to its shareholders or China Tongda, and other entities become exposed to expected losses of China Jinxin.

c.

China Jinxin undertakes additional activities or acquires additional assets, beyond those anticipated at the later of the inception of China Jinxin or the latest reconsideration event, that increase the entity's expected losses.

d.

China Jinxin receives an additional equity investment that is at risk, or China Jinxin curtails or modifies its activities in a way that decreases its expected losses.

There has been no change in the VIE
structure during the three months ended March 31, 2017 and 2016, and none of the events listed in a-d above have occurred.

The
accompanying CFS include the accounts of Real Fortune BVI, Real Fortune HK, China Tongda, China Jinxin and China Huaxin,
which are collectively referred to as the “Company”. All significant intercompany accounts and transactions were eliminated
in the CFS.

Going Concern

The Company incurred
a net loss of $1.30 million for the three months ended March 31, 2017. The Company also had a working capital deficit of $51.84
million as of March 31, 2017. In addition, China Jinxin has refused to sell its iron ore concentrate to its sole customer because
of the low price offered. These conditions raise substantial doubt about the Company's ability to continue as a going concern.
The CFS do not include any adjustments that might result from the outcome of this uncertainty. China Jinxin is upgrading its facility
and equipment, which when completed, will enable the Company to produce DRI. China Jinxin’s DRI facility upgrade was almost
complete as of the date of this report and is currently in the final stage of adjusting the equipment and making certain modifications
to the facility after relevant authority’s inspection and testing. A shareholder of the Company indicated she
will continue to fund China Jinxin, although there is no written agreement in place and China Jinxin currently owes her $10.19
million. In addition, China Huaxin currently owes $24.17 million to three of the Company’s shareholders for constructing
its DRI facility; one is the major lender of China Jinxin who lent $16.52 million to China Huaxin, and the other two are also members
of the Company’s management. In addition, China Huaxin borrowed $5.02 million from companies owned by its major shareholder.
China Huaxin completed trial production and expected to commence commercial production in May 2015. However, as a result of
environmental initiatives by national, provincial and local government authorities in China, in June 2015, China Huaxin began upgrading
the DRI facilities by converting the existing coal-gas station systems to liquefied natural gas (“LNG”) station
systems. The conversion to LNG systems will reduce pollutants and produce higher quality DRIs with less impurities. China Huaxin
has completed the upgrading and resumed trial production from its upgraded DRI facilities. China Huaxin is currently doing the
equipment debugging and adjustments, and expects the official production to resume in mid-2017.

In preparing financial
statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Significant estimates, required by management, include the recoverability
of long-lived assets, allowance for doubtful accounts, and the reserve for obsolete and slow-moving inventories. Actual results
could differ from these estimates.

Business Combination

For a business
combination, the assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree are recognized at the
acquisition date, measured at their fair values as of that date. In a business combination achieved in stages, the identifiable
assets and liabilities, as well as the noncontrolling interest in the acquiree, are recognized at the full amounts of their fair
values. In a bargain purchase in which the total acquisition-date fair value of the identifiable net assets acquired exceeds the
fair value of the consideration transferred plus any noncontrolling interest in the acquiree that excess in earnings is recognized
as a gain attributable to the acquirer.

Deferred tax liability
and asset are recognized for the deferred tax consequences of differences between the tax bases and the recognized values of assets
acquired and liabilities assumed in a business combination in accordance with FASB ASC Subtopic 740-10.

Goodwill

Goodwill is the
excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of businesses
acquired. In accordance with FASB ASC Topic 350, “Intangibles-Goodwill and Other,” goodwill is not amortized but is
tested for impairment, annually or when circumstances indicate a possible impairment may exist. Impairment testing is performed
at a reporting unit level. An impairment loss generally would be recognized when the carrying amount of the reporting unit exceeds
its fair value, with the fair value of the reporting unit determined using discounted cash flow (“DCF”) analysis. A
number of significant assumptions and estimates are involved in the application of DCF analysis to forecast operating cash
flows, including the discount rate, the internal rate of return and projections of realizations and costs to produce. Management
considers historical experience and all available information at the time the fair values of its reporting units are estimated.

On January 23,
2014, the Company completed the acquisition of China Huaxin. Under the acquisition method of accounting, the total purchase
price is allocated to tangible assets and intangible assets acquired and liabilities assumed based on their fair values with the
excess recorded to goodwill. The Company recognized RMB 40.02 million ($6.54 million) goodwill from the acquisition. At
December 31, 2015, the Company reappraised the fair value of China Huaxin by using the replacement cost since China Huaxin did
not start official production in 2015 due to the upgrading of its DRI facilities. As of March 31, 2017 and December
31, 2016, the Company evaluated the impairment goodwill of using DCF analysis and concluded the goodwill of Huaxin was not
impaired.

Cash and Equivalents

For financial statement purposes,
the Company considers all highly liquid investments with an original maturity of three months or less to be cash
equivalents. The Company’s account in the Agriculture Bank of China, Zhuolu Branch of China Jinxin was required to
be frozen for RMB654,300.00 ($94,320) since October 2016 as a result of a civil judgement for accidental death in favor of an
employee death (see Note 17). The Company’s bank account in the Bank of China, Cangzhou Bohai district Branch of China
Huaxin was required to be frozen for RMB79,852 ($11,574) as a result of two civil judgements against the Company for repaying
two personal loans (see Note 17). Due to limited cash balance in the bank account, the Company recorded $8,791 and $94,320 as
restricted cash as of March 31, 2017 and December 31, 2016, respectively.

The Company maintains
reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment
patterns to evaluate the adequacy of these reserves. The Company had no accounts receivable or bad debt allowances at March 31,
2017 and December 31, 2016.

Inventory,
net

Inventory mainly
consists of iron ore, iron ore concentrate, mineral powder and coal slime for DRI. Inventory is valued at the lower
of average cost or market, cost being determined on a moving weighted average basis method; including labor and all production
overheads.

Property and
Equipment, net

Property and equipment
are stated at cost, less accumulated depreciation. Major repairs and betterments that significantly extend original useful lives
or improve productivity are capitalized and depreciated over the period benefited. Maintenance and repairs are expensed as incurred.
When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from
the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is computed
using shorter of useful lives of the property or the unit of depletion method. For shorter-lived assets the straight-line method
over estimated lives ranging from 3 to 20 years is used as follows:

Office Equipment

3-5 years

Machinery

10 years

Vehicles

5 years

Building

20 years

Impairment of Long-Lived Assets

Long-lived assets,
which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.

Recoverability
of long-lived assets to be held and used is measured by comparing the carrying amount of an asset to the estimated undiscounted
future cash flows expected to be generated by it. If the carrying amount of an asset exceeds its estimated undiscounted future
cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds its fair value (“FV”).
FV is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.
Based on its review, the Company believes that, as of March 31, 2017 and December 31, 2016, there were $1.07 million and $1.07
million in impairments of its long-lived assets, respectively (See Note 6).

Income Taxes

The Company follows
FASB ASC Topic 740, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for expected
future tax consequences of events included in the financial statements or tax returns. Under this method, deferred income taxes
are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.

When tax returns
are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are
subject to uncertainty about their merits or the amount of the position that would be ultimately sustained. The benefit of a tax
position is recognized in the financial statements in the period during which, based on all available evidence, management believes
it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation
processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not
recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement
with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured
as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any
associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized
tax benefits are classified as interest expense and penalties are classified in selling, general and administrative expenses in
the statements of income. At March 31, 2017 and December 31, 2016, the Company did not take any uncertain positions that would
necessitate recording a tax related liability.

The Company’s
revenue recognition policies are in compliance with FASB ASC Topic 605, “Revenue Recognition”. Sales
are recognized when a formal arrangement exists, which is generally represented by a contract between the Company and the buyer;
the price is fixed or determinable; title has passed to the buyer, which generally is at the time of delivery; no other significant
obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria
for revenue recognition are recorded as unearned revenue.

Sales are the
invoiced value of iron ore concentrate and DRI products, net of value-added tax (“VAT”). All of the Company’s
iron ore concentrate sold in the PRC is subject to a value-added tax of 17% of the gross sales price. This VAT may be offset
by VAT paid by the Company on raw materials and other materials included in the cost of producing the finished product. The Company
records VAT payable and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the
payables against the receivables. Sales and purchases are recorded net of VAT collected and paid as the Company acts as an agent
for the government.

Cost of Goods
Sold

Cost of goods
sold (“COGS”) consists primarily of fuel and power, direct material and labor, depreciation of mining plant and equipment,
attributable to the production of iron ore concentrate. Any write-down of inventory to lower of cost or market is also recorded
in COGS.

Concentration
of Credit Risk

The operations
of the Company are in the PRC. Accordingly, the Company’s business, financial condition, and results of operations
may be influenced by the political, economic, and legal environments in the PRC, and by the general state of the PRC economy.

The Company has
cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC. Cash in state-owned banks is not
covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on
its cash in these bank accounts.

Statement of
Cash Flows

In accordance
with FASB ASC Topic 230, “Statement of Cash Flows”, cash flows from the Company’s operations are calculated based
upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not
necessarily agree with changes in the corresponding balances on the balance sheet. Cash from operating, investing and
financing activities is net of assets and liabilities acquired.

Fair Value
of Financial Instruments

For certain of
the Company’s financial instruments, including cash and equivalents, accrued liabilities and accounts payable, carrying amounts
approximate their fair values due to their short maturities. FASB ASC Topic 825, “Financial Instruments,”
requires disclosure of the FV of financial instruments held by the Company. The carrying amounts reported in the balance sheets
for current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the
short period of time between the origination of such instruments and their expected realization and the current market rate of
interest.

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

●

Level 3 inputs to the valuation methodology are unobservable and significant to the FV measurement.

As of March 31,
2017 and December 31, 2016, the Company did not identify any assets and liabilities that are required to be presented on the balance
sheet at FV.

Foreign Currency
Translation and Comprehensive Income (Loss)

The functional
currency of China Jinxin and China Huaxin is RMB. For financial reporting purposes, RMB is translated into USD as the reporting
currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet dates. Revenues and expenses
are translated at the average rate of exchange prevailing during the reporting period.

Translation adjustments
arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity
as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency transactions are included
in income. There was no significant fluctuation in the exchange rate for the conversion of RMB to USD after the balance sheet date.

The Company uses
FASB ASC Topic 220, “Comprehensive Income”. Comprehensive income (loss) is comprised of net income and all changes
to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and
distributions to stockholders. Comprehensive loss for the three months ended March 31, 2017 and 2016 consisted of net loss and
foreign currency translation adjustments.

Share-based compensation

The Company accounts for share-based compensation
awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires
that share-based payment transactions with employees be measured based on the grant-date FV of the equity instrument issued and
recognized as compensation expense over the requisite service period.

The Company accounts for share-based compensation
awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-employees”.
Share-based compensation associated with the issuance of equity instruments to non-employees is measured at the FV of the equity
instrument issued or committed to be issued, as this is more reliable than the FV of the services received. The FV is measured
at the date that the commitment for performance by the counterparty has been reached or the counterparty's performance is complete.

Earnings (loss)
per Share (EPS)

Basic EPS is computed
by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar
to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding
if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive.
Diluted EPS is based on the assumption that all dilutive convertible shares and stock options and warrants were converted
or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and warrants, and the if-converted
method for the outstanding convertible instruments. Under the treasury stock method, options and warrants are assumed to be exercised
at the beginning of the period (or at the time of issuance, if later) and as if funds obtained thereby were used to purchase common
stock at the average market price during the period. Under the if-converted method, outstanding convertible instruments are assumed
to be converted into common stock at the beginning of the period (or at the time of issuance, if later).

FASB ASC Topic
280, “Segment Reporting”, requires use of the “management approach” model for segment reporting. The
management approachmodel is based on the way a company’s management organizes segments within the Company for
making operating decisions and assessing performance. Reportable segments are based on products and services, geography,
legal structure, management structure, or any other manner in which management disaggregates a company.

FASB ASC Topic
280 has no effect on the Company’s financial statements as substantially all of its operations are conducted in one industry
segment – iron ore mining. With the upgrading of DRI facilities for both China Jinxin and China Huaxin, the Company
will be shifting its main product from iron ore to DRI when the upgrading is completed and production starts.

New Accounting
Pronouncements

In August 2014, the Financial Accounting
Standards Board (“FASB”) issued Presentation of Financial Statements — Going Concern. This standard requires
management to evaluate for each annual and interim reporting period whether it is probable that the reporting entity will not be
able to meet its obligations as they become due within one year after the date that the financial statements are issued. If the
entity is in such a position, the standard provides for certain disclosures depending on whether or not the entity will be able
to successfully mitigate its going concern status. This guidance is effective for annual periods ending after December 15, 2016
and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The Company does not
anticipate that this adoption will have a significant impact on its CFS.

In July 2015, the FASB issued Accounting
Standards Update (“ASU”) No. 2015-11, Inventory, which requires an entity to measure inventory within the scope at
the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business,
less reasonably predictable costs of completion, disposal, and transportation. The effective date for the standard is for fiscal
years beginning after December 15, 2016. Early adoption is permitted. The Company does not anticipate that this adoption will have
a significant impact on its CFS.

In September 2015, the FASB issued ASU
No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. To simplify the
accounting for adjustments made to provisional amounts recognized in a business combination, the amendments eliminate the requirement
to retrospectively account for those adjustments. For public business entities, the amendments are effective for fiscal years beginning
after December 15, 2015, including interim periods within those fiscal years. For all other entities, the amendments in this update
are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December
15, 2017. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date
with earlier application permitted for financial statements that have not been issued. The Company does not anticipate that this
adoption will have a significant impact on its CFS.

In May 2014, the FASB issued No. 2014-09,
Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Accounting Standards Codification
605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity
recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB approved a one-year
deferral of the effective date of the new revenue recognition standard. Public business entities, certain not-for-profit entities,
and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December
15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual
reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. In March
2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting
Revenue versus Net). In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying
Performance Obligations and Licensing. In May 2016, the FASB issued ASU 2016-11, Revenue from Contracts with Customers (Topic 606)
and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of ASU 2014-09 and 2014-16, and ASU 2016-12, Revenue
from Contracts with Customers (Topic 606) - Narrow Scope Improvements and Practical Expedients. These ASUs clarify the implementation
guidance on a few narrow areas and adds some practical expedients to the guidance Topic 606. The Company is evaluating the effect
that these ASUs will have on its CFS.

On March 30, 2016, the FASB issued ASU
No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which includes amendments to accounting for income taxes
at settlement, forfeitures, and net settlements to cover withholding taxes. The amendments in ASU 2016-09 are effective for public
companies for fiscal years beginning after December 31, 2016, and interim periods within those annual periods. Early adoption is
permitted but requires all elements of the amendments to be adopted at once rather than individually. The Company is evaluating
the effect that ASU No. 2016-09 will have on the Company’s CFS.

In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets
held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces
the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized
cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its CFS.

In August 2016, the FASB issued ASU No.
2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies the presentation and classification of
certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for public business entities for
fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company
is currently assessing the potential impact of ASU 2016-15 on its CFS.

In October 2016, the FASB issued ASU No.
2016-16—Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU improves the accounting
for the income tax consequences of intra-entity transfers of assets other than inventory. For public business entities, the amendments
in this update are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods
within those annual reporting periods. Early adoption is permitted. The Company does not anticipate that the adoption of this ASU
will have a significant impact on its CFS.

In October 2016, the FASB issued ASU No.
2016-17 Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control. This update amends the
consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat
indirect interests in the entity held through related parties that are under common control with the reporting entity when determining
whether it is the primary beneficiary of that VIE. This ASU is effective for public business entities for fiscal years beginning
after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company does not
anticipate that the adoption of this ASU will have a significant impact on its CFS.

In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash. The guidance requires that a statement of cash flows explain the change
during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash
equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with
cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash
flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim period within those fiscal
years. Early adoption is permitted, including adoption in an interim period. The standard should be applied using a retrospective
transition method to each period presented. The Company does not anticipate that the adoption of this ASU will have a significant
impact on its CFS.

In January 2017, the FASB issued ASU No. 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with
the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions
or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including
interim periods within those fiscal years. Early adoption is permitted. The standard should be applied prospectively on or after
the effective date. The Company will evaluate the impact of adopting this standard prospectively upon any transactions of acquisitions
or disposals of assets or businesses.

In January 2017, the FASB issued ASU 2017-04,
Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical
purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds
its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual
or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual
goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact
of adopting this standard on its CFS.

3. INVENTORY

Inventory consisted of the following
at March 31, 2017 and December 31, 2016:

2017

2016

Material

$

307,937

$

305,381

Finished goods

597,320

594,073

Less: inventory impairment allowance

(207,062

)

(205,936

)

Total

$

698,195

$

693,518

4. MINING RIGHTS

The Company is
currently negotiating with the Department of Land and Resources of Hebei Province and the local Zhuolu County government to obtain
the rights to mine in Zhuolu County where one of its production facilities is located. Pending the final contract, the
Company accrued the cost of mining rights based on the quantity of ore extracted (see Note 11). The Company used $0.68 (RMB 2.4
per ton) based on a royalty rate prescribed by the local authority based on the purity of ore in the subject mines. If the rate
per ton of ore changes when the contract is finalized, the Company will account for the change prospectively as a change in an
accounting estimate. The Company did not extract any ore in the three months ended March 31, 2017 and 2016, and accordingly
did not accrue the cost of mining rights for the three months ended March 31, 2017 and 2016.

5. VALUE-ADDED TAX RECEIVABLE

At March 31, 2017
and December 31, 2016, the Company had VAT receivable of $2,672,449 and $2,651,258, respectively. It was the VAT paid
on purchases, and it can be carried forward indefinitely for offsetting against future VAT payable.

6. PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of
the following at March 31, 2017 and December 31, 2016:

2017

2016

Building

$

20,512,490

$

20,401,012

Production equipment

16,113,031

16,030,128

Transportation equipment

1,176,597

1,170,203

Office equipment

241,127

238,822

Total

38,043,245

37,840,165

Less: Accumulated depreciation

(12,941,498

)

(12,197,221

)

Less: impairment allowance

(1,072,735

)

(1,066,905

)

Net

$

24,029,012

$

24,576,039

Depreciation for the three months ended
March 31, 2017 and 2016 was $680,372 and $692,865, respectively.

In 2016, all of
the Company's sales was to a related party company owned by its major shareholder. The Company uses sales to offset the borrowings
from this related party company.

Advance from related parties

At March 31, 2017
and December 31, 2016, China Jinxin owed one of its shareholders $10,220,982 and $10,039,155, respectively, for the purchase of
equipment used in construction in progress and for working capital needs. The advance from shareholders will not bear
interest prior to the commencement of the Company's production pursuant to an amended loan agreement entered on January 16, 2013.
Commencing on the production date, interest will begin to accrue at the bank's annual interest rate on certificates of deposit
at that time on the amount outstanding from time to time and all amounts inclusive of accrued interest is to be repaid within three
years of commencement of production at the Zhuolu Mine. China Jinxin had not commenced production as of March 31, 2017.

At March
31, 2017, China Huaxin owed three shareholders, two of whom are also the Company’s management, $24.17 million used to construct
its DRI facility. Of the $24.17 million, $6.91 million had interest of 10% and a due date of six months from the start date of
official production. The remaining payable bore no interest, and is payable upon demand. China Huaxin also borrowed
$5.02 million from certain companies owned by its major shareholder, which bore no interest and is payable upon demand. At March
31, 2017, China Huaxin also owed one related party who is the brother of the Company’s major shareholder the amount
of $72,471, this loan bore interest of 10% and is payable upon demand.

At December
31, 2016, China Huaxin owed three shareholders, two of whom are also the Company’s management, $23.88 million used to construct
its DRI facility. Of the $23.88 million, $6.88 million had interest of 10% and a due date of six months from the start date of
official production. The remaining payable bore no interest, and is payable upon demand. China Huaxin also borrowed
$4.99 million from certain companies owned by its major shareholder, which bore no interest and is payable upon demand. At December
31, 2016, China Huaxin also owed one related party who is the brother of the Company’s major shareholder the amount
of $72,077, this loan bore interest of 10% and is payable upon demand.

At March 31, 2017
and December 31, 2016, Real Fortune HK owed one shareholder $1.20 million for advances to meet operating needs. This advance bears
no interest and is payable upon demand.

Below is the summary
of advances from related parties at March 31, 2017 and December 31, 2016, respectively.

Intangible assets
consisted solely of land use rights. All land in the PRC is government-owned and cannot be sold to any individual or company. However,
the government grants the user a “land use right” to use the land. China Jinxin acquired land use rights during 2006
for $0.75 million (RMB 5 million). China Huaxin acquired land use rights for $2.96 million (RMB 18.24 million) in November 2012
with FV of $5.04 million (RMB 31 million) at acquisition date. China Jinxin and China Huaxin have the right to use their land for
20 and 49 years, respectively, and are amortizing such rights on a straight-line basis for 20 and 49 years, respectively.

Intangible assets
consisted of the following at March 31, 2017 and December 31, 2016:

2017

2016

Land use rights

$

3,561,006

$

3,541,654

Less: Accumulated amortization

(554,267

)

(527,533

)

Net

$

3,006,739

$

3,014,121

Amortization of intangible assets for
the three months ended March 31, 2017 and 2016 was $23,897 and $25,205, respectively. Annual amortization for the next five years from
April 1, 2017, is expected to be: $95,406; $95,406; $95,406; $95,406, and $95,406.

9. CONSTRUCTION IN PROGRESS

Construction in
progress is for the purchase and installation of equipment for future iron ore refining for China Jinxin. China
Jinxin had construction in progress of $6,029,718 and $6,036,736 at March 31, 2017 and December 31, 2016, respectively. China Jinxin
completed most of the construction for iron ore refining; however, the management plans to further upgrade the facility for DRI
production due to increased demand for DRI products in China. The construction for China Jinxin’s DRI facility upgrade was
almost completed as of the date of this report date and is currently in the final stage of adjusting the equipment and making certain
modification to the facility after relevant authority’s inspection and testing.

10. DEFERRED TAX LIABILITY

At March 31, 2017,
deferred tax liability was $0.

At December 31,
2016, deferred tax liability of $2,485 arose from the differences between the tax bases and book bases of property and equipment
and intangible assets arising from the acquisition of China Huaxin.

11. ACCRUED LIABILITIES AND OTHER
PAYABLES

CURRENT

Accrued liabilities and other payables
consisted of the following at March 31, 2017 and December 31, 2016:

As of March 31,
2017, the $6,167,537 due to unrelated parties were short-term advances from unrelated companies or individuals for the
Company’s construction and working capital needs, of which, $2,544,968 bore interest of 10% and is due 6 months after the
commencement of China Huaxin’s official production. The remaining amount of short-term advances bore no interest, and
is payable upon demand.

As of December
31, 2016, the $6,134,019 due to unrelated parties were short-term advances from unrelated companies or individuals for
the Company’s construction and working capital needs, of which, $2,629,384 bore interest of 10% and is due 6 months after
the commencement of China Huaxin’s official production. The remaining amount of short-term advances bore no interest,
and is payable upon demand.

NONCURRENT

Under local environmental
regulations, the Company is obligated at the end of the mine’s useful life to restore and rehabilitate the land that is used
in its mining operations. The Company estimates it would cost $560,000 (RMB 3.5 million) to restore the entire Zhuolu mine
after extracting all the economical ore for such efforts.

The Company accrued
certain mine restoration expenses based on the actual production volume during the period it extracted ore. As of March 31, 2017
and December 31, 2016, the long term accrued mine restoration cost was $11,864 and $11,800, respectively. There was no production
during the three months ended March 31, 2017 and 2016.

12. SHORT TERM LOAN

At March 31, 2017
and December 31, 2016, China Jinxin had a short-term bank loan of $188,425 and $187,401, respectively. This loan was
entered in June 2013 for one year, and renewed on June 27, 2014 to June 26, 2015, with monthly interest of 0.9%. This
loan was renewed on June 30, 2015, for a one-year term to June 29, 2016, and was further renewed to June 26, 2017, with monthly
interest of 0.83375%. The loan was secured by a lien on a fixed asset of China Jinxin.

13. PAYABLE
TO CONTRACTORS

In 2007 and 2008,
the Company entered into contracts with an equipment supplier and a construction company for equipment and construction of a water
pipeline for $5.75 million (RMB 38 million). The Company recorded the payable in 2009. In 2010, the Company amended the payment
terms and paid $2.2 million (RMB 14.5 million) and agreed to pay the remaining balance as follows: $2.08 million (RMB 13.5 million)
on December 31, 2011, and $1.47 million (RMB 10 million) on December 31, 2012. During 2011, the Company paid $2.86 million (RMB
18.0 million). During 2012, the Company did not make any payment on this payable. On March 20, 2013, the Company amended the payment
terms and agreed to pay the remaining balance of $902,098 (RMB 5,500,000) on December 31, 2014. Based on the amended agreement,
if the Company paid in full by December 31, 2014, no interest would be charged. The Company agreed that if it defaulted it would
pay interest starting on January 1, 2015 based on the current bank interest rate for the remaining balance at that time. Starting
from January 1, 2015, the Company agreed to pay interest based on the current bank interest rate of 5.35% for the outstanding
balance at December 31, 2014. As of March 31, 2017 and December 31, 2016, the Company has $797,182 and $792,850
of payable to contractors, respectively.

The Company recorded
the restructuring of this payable in accordance with ASC 470-60-35-5, as it was a modification of its terms, it did not involve
a transfer of assets or grant of an equity interest. Accordingly, the Company accounted for the effects of the restructuring prospectively
from the time of restructuring, and did not change the carrying amount of the payable at the time of the restructuring as the carrying
amount did not exceed the total future cash payments specified by the new terms.

14. STOCKHOLDERS’ EQUITY

Shares issued to consulting firm

On November 15, 2016, the Company entered
into a consulting agreement with a consulting firm. The Company issued 3,000,000 shares of the Company’s common stock to
the firm for 24 months of consulting services including financial analysis, business plan advisory, due diligence assistance for
financing and IR services. The shares were issued in January 2017; and the FVwas $1,050,000, which was recorded as prepaid
expense; the FV was calculated based on the stock price of $0.35 per share on November 15, 2016, and amortized over the service
term. At March 31, 2017, the Company had prepaid expense of $853,125. During the three months ended March 31, 2017, the Company
amortized $131,250 as stock compensation expense. In addition to the 3,000,000 shares, the Company also agreed to pay the consultant
$4,000 cash per month on or before the 5th day of each calendar month.

The Company’s
operating subsidiary is governed by the Income Tax Laws of the PRC and various local tax laws. Effective January 1, 2008, China
adopted a uniform tax rate of 25% for all enterprises (including foreign-invested enterprises).

The following
table reconciles the statutory rates to the Company’s effective tax rate for the three months ended March 31, 2017 and 2016:

2017

2016

US statutory rates (benefit)

(34.0

)%

(34.0

)%

Tax rate difference

9.1

%

9.2

%

Valuation allowance on NOL

24.7

%

24.2

%

Tax per financial statements

(0.2

)%

(0.6

)%

The income tax for the three months
ended March 31, 2017 and 2016, consisted of the following:

2017

2016

Income tax (benefit) expense – current

$

—

$

—

Income tax (benefit) expense – deferred

(2,499

)

(8,212

)

Total income tax benefit

$

(2,499

)

$

(8,212

)

16. MAJOR CUSTOMER AND VENDORS

Sales for the
three months ended March 31, 2017 and 2016 were $0, respectively.

China Jinxin made
a 10-year contract with Handan Steel Group Company (“HSG”) a state-owned enterprise, and agreed to sell all of its
output from its Zhuolu production facility to HSG. The selling price was to be based on the market price. HSG agreed to purchase
all the Company’s products from its Zhuolu production facility regardless of changes in the market. China Jinxin is economically
dependent on HSG. However, as of today, China Jinxin has refused to sell its iron ore concentrate to its sole customer because
of the low price offered.

17. LITIGATION

On September 4, 2012, Shijiazhuang City
QiaoXi District People’s Court ruled China Huaxin had to repay a loan of RMB 49,067 ($7,073) plus court fees of RMB 510 ($74)
to a plaintiff within 10 days of the judgment. China Huaxin has paid RMB 10,216 ($1,481)
in January 2017.

On April 7, 2013, the Zhulu County Labor
Dispute Arbitration Committee ruled that China Jinxin had to pay RMB 654,300 ($94,320) to an employee as a result of her death
in a traffic accident in 2010 when she was on the way to China Jinxin. China Jinxin denied that it had an employment relationship
with the plaintiff and appealed to Hebei Province Zhulu County People’s Court; on August 3, 2015, Hebei Province Zhulu County
People’s Court confirmed there was an employment relationship and affirmed the original judgement in favor of the plaintiff.
The Court froze the Company’s bank account for $94,320 in October 2016. This liability was accrued as of December 31, 2016.

On December 30, 2016, Hebei Province Haixing
County People’s Court ruled that China Huaxin had to pay the outstanding balance of RMB 410,537 ($59,181) electricity fee
plus RMB 3,288 ($474) in court fees that it owed to GuoWang Hebei Province Electric Company Haixing County branch before January
9th, 2017. China Huaxin accrued this liability in 2016 and paid the balance in full in March 2017.

On August 13, 2014, Heibei Province Haixing
County People’s Court ruled that China Huaxin had to repay a loan of RMB 60,000 ($8,697) plus applicable interest which
is calculated based on the Bank of China’s interest rate for the loan with the same term to a plaintiff within 10 days of
the judgment. At March 31, 2017, China Huaxin had outstanding balance of RMB 39,502
($5,726).

Pursuant to the
corporate law of the PRC effective January 1, 2006, the Company is now only required to maintain one statutory reserve by appropriating
money from its after-tax profit before declaration or payment of dividends. The statutory reserve represents restricted retained
earnings.

19. OPERATING RISKS

The Company’s
operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North
America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and
foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect
to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation,
among other things.

The Company’s
sales, purchases and expenses are denominated in RMB and all of the Company’s assets and liabilities are also denominated
in RMB. The RMB is not freely convertible into foreign currencies under the current law. In China, foreign exchange transactions
are required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB may require
certain supporting documentation in order to effect the remittance.

All mineral resources in China are owned
by the state. Thus, the Company’s ability to obtain iron ore is dependent upon its ability to obtain mineral rights
from the relevant state authorities, purchase ore from another party that has mining rights from the state or import ore from outside
the PRC. It is generally not feasible to transport iron ore any significant distance before processing. The Company has yet to
obtain long term rights to any iron mine and there is no assurance the Company will be able to do so. Although the Company has
extracted iron ore from the Zhuolu Mine on which the Company’s production facilities are located, the Company does not have
the right to do so and can be subjected to various fines and penalties. The Company is not able to determine the amount of fines
and penalties at the current stage; however, the Company believes the fines and penalties are negotiable with the authorities.
If the Company is not able to obtain mining rights to the Zhuolu Mine in the future, the Company will have to cease mining operations
at the Zhuolu Mine and the Company will seek to acquire iron ore from third parties. The failure to obtain iron ore reserves for
processing at all or on reasonably acceptable terms would have a material adverse impact on our business and financial results.

20. SUBSEQUENT
EVENT

On April 27, 2017, the Company issued a
press release announcing the restart of production following a 2-year production modernization period. The production
was limited to test runs and no revenue was accrued during the first quarter of 2017.

Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations

Overview

We seek to profit
by participating in various aspects of the Chinese steel making industry including the mining and processing of iron ore and other
forms of iron, which can be used to produce iron concentrate, fines, pellets or sinter. To date we have been engaged in iron ore
processing and the production of iron ore concentrate in the People’s Republic of China (“PRC”) through our variable
interest entity (‘VIE’), China Jinxin, and through the production of DRI by our subsidiary, China Huaxin.

China Jinxin’s
DRI facility upgrade was almost completed as of the date of this report and is currently in the final stage of adjusting equipment
and making certain modification to the facility after relevant authority’s inspection and testing.

On January 17,
2014, we acquired a direct reduced iron (“DRI”) production facility in Haixing County, Hebei Province. We
completed trial production at this facility and expected to commence commercial production in May 2015. However, as a result of
environmental initiatives by government authorities in China, starting in June 2015, we began upgrading the DRI facilities by converting
the existing coal-gas station systems to liquefied natural gas (“LNG”) station systems. The conversion
to LNG systems will reduce pollutants and produce higher quality DRIs with less impurities. China Huaxin has completed the upgrading
and resumed trial production from its upgraded DRI facilities. China Huaxin is currently doing equipment debugging and adjustment,
and expects to resume official production in mid-2017.

We own all of
the issued and outstanding capital stock of Real Fortune BVI, which in turn owns all of the issued and outstanding capital stock
of Real Fortune Holdings Limited, a Hong Kong limited company (“Real Fortune HK”), which in turn owns all of the
issued and outstanding capital stock of Zhangjiakou Tongda Mining Technologies Service Co., Ltd., a Chinese limited company (“China
Tongda”). Real Fortune BVI was established in the BVI in September 2010 to serve as an intermediate holding company.
Real Fortune HK was established in HK in April 2010. China Tongda was established in the PRC in August 2010, and in August 2010,
the local government of the PRC issued a certificate of approval regarding the foreign ownership of China Tongda by Real Fortune
HK. China Jinxin, one of our operating affiliates, was established in the PRC in December 2006.

We have effective
control of the management and operations of China Jinxin, an iron ore processing and high grade iron ore concentrate producer with
a production line located in Zhuolu County, Zhangjiakou City, Hebei Province, China, through a series of agreements among China
Tongda, China Jinxin and its shareholders, referred to as “VIE agreements.” China Jinxin has an annual capacity of
approximately 300,000 tons. Under the VIE agreements, China Tongda is entitled to receive the pre-tax profits of China
Jinxin.

On January 17,
2014, China Tongda acquired all of the outstanding shares of China Huaxin. China Huaxin produces Direct Reduced Iron (DRI) at its
DRI production facility (the “DRI Facility”) in Haixing County, Hebei Province, about 50 km from the nearest port,
using advanced reduction rotary kiln technology with iron sand as the principal raw material. China Huaxin imports iron sands
from New Zealand, Australia, Indonesia and the Philippines. The total amount expended to construct the DRI Facility, inclusive
of both hard and soft costs, was approximately 244,270,000 RMB or $39 million. China Huaxin completed trial production
in May 2015. However, due to environmental initiatives by government authorities in China, starting in June 2015, China Huaxin
began upgrading the DRI facilities by converting the existing coal-gas station systems to liquefied natural gas (“LNG”) station
systems. In the end of 2016, China Huaxin completed the upgrading and resumed trial production from its upgraded DRI facilities.
Unlike China Jinxin, which we control through the VIE agreements, China Huaxin is directly owned by China Tongda, our wholly owned
subsidiary.

To date, we have
received only temporary manufacturing licenses granted by the agencies of the local government, which allowed us to process ore
that we obtained from Zhuolu Mine, the mine on which our facility is located, or other third parties.

Our ability to
profit from our facility in Zhuolu is dependent upon our ability to extract and process iron ore from the Zhuolu Mine and sell
the output for a price that enables us to profit. To date, all of our sales from this facility have been made to a single customer.
We entered into a ten-year contract with this customer, which expires in January 2019. Pursuant to this agreement, we agreed to
sell the customer, HSG, all of the output from our Zhuolu facility, which it agreed to purchase. The price paid to us by HSG is
to be determined by HSG in light of the quality of our product and market prices and is to be such that it results in a proper
margin to us. Thus, our ability to profit from our current production facility at the Zhuolu Mine over the next few years
will be determined by the prices we receive from HSG. We cannot guarantee that HSG will not offer a price below what it pays to
the Company’s competitors. The lower price will reduce our profit margin. However, if we are not satisfied with the price
set by HSG, we can attempt to renegotiate the price. In an effort to obtain a higher price from HSG, we have yet to deliver iron
ore concentrate we produced in the fourth quarter of 2011. We are continuing to negotiate with HSG to resolve our dispute over
the price to be paid for our output.

There was no production
and sales for the three months ended March 31, 2017 and 2016. China Huaxin is currently doing the equipment debugging and
adjustment, and expected the official production in mid-2017.

All mineral resources
in China are owned by the state. Thus, our ability to obtain iron ore depends upon our ability to obtain mineral licenses from
the relevant state authorities, purchase ore from another party that has mining rights or import ore from outside of China. It
is generally not feasible to transport iron ore any significant distance before processing. We believe, as evidenced by our shareholders’
willingness to finance the construction of our Zhuolu facilities, there is sufficient iron ore in the vicinity of our Zhuolu facilities
to enable us to operate them at a profit. Nevertheless, we have yet to obtain long term rights to any iron mine and there is no
assurance we will be able to do so. Although we extracted iron ore from the Zhuolu Mine where our production facilities are located,
we do not have the right to do so and can be subjected to various fines and penalties. However, since we paid geological survey
fees on behalf of the local government so it could process applications related to the right to mine the Zhuolu Mine and has not
received any challenges from any authorities regarding our mining activities, we believe that even if fines and penalties are assessed
against us in the future, the amount should be negotiable with the authorities. If we are unable to obtain mining rights to the
Zhuolu Mine, we will have to acquire iron ore from third parties. The failure to obtain iron ore for processing at all or on reasonably
acceptable terms would have a material adverse impact on our business and financial results. We have not yet receive the official
mining rights to extract; accordingly, we made a provision for fixed assets impairment for all the mine extracting and broken equipment
and machinery. We’ve been negotiating a sale agreement with a new customer for China Jinxin, and expecting the agreement
to be signed in mid-2017.

To date we have
been dependent upon cash advances from our shareholders. If we were not to obtain sufficient iron ore for processing, it is likely
our operations would cease unless our shareholders continue to provide sufficient funds to maintain our plant and equipment until
such time as our operations could be resumed.

We may seek to
grow our operations by acquiring mining rights and other production facilities. The cash necessary to acquire such rights may exceed
that which we have on hand. In such event, we may seek to raise the necessary cash through bank loans or the issuance of equity
to the vendors of such rights, our shareholders or third parties. There can be no assurance such cash will be available to us on
reasonable terms, if at all. The prices and terms at which we issue equity securities and the performance of any rights or facilities
we acquire, will determine whether we operate profitably.

The profitability
of the mining industry in China and of our Company in particular, is dependent upon the demand for iron ore and other metals within
China. This demand in turn, is influenced by general economic factors, such as the rate of growth of the economy and of the construction
industry. There can be no assurance that China will return to the rapid rates of growth it experienced in the recent past. If the
rate of growth of the Chinese economy remains low or were to slow down, demand for iron and steel could fall, adversely impacting
our operations.

Our revenues have
been from the sale of DRI and iron ore concentrate. We commenced production of iron ore at our Zhuolu facility in March 2010. However,
we ceased production from September 2010 to March 2011 because the local government implemented an “Energy Saving and Emission
Reduction Plan” to reduce local power consumption. We installed power equipment to enable us to maintain a stable power supply
to our production equipment and management believes the Energy Saving and Emission Reduction Plan is one-time event and disruptions
to our access to energy will not have a material impact on our production in the future. We also ceased production in December
2011 due to a pricing dispute with our major customer and to upgrade our production facilities. Construction for China Jinxin’s
DRI facility upgrade was complete as of the date of this report and we are currently in the final stages of adjusting the equipment
and making certain modification to the facility after relevant authority’s inspection and testing.

We acquired a
new subsidiary, China Huaxin, in January 2014, through which we own a direct reduced iron production facility, which was recently
constructed. China Huaxin completed trial production and expected to commence commercial production in May 2015. However, as a
result of environmental initiatives by government authorities in China, starting in June 2015, China Huaxin has been upgrading
the DRI facilities by converting the existing coal-gas station systems to liquefied natural gas (“LNG”) station
systems. The conversion to LNG systems will reduce pollutants and produce higher quality DRIs with less impurities. China
Huaxin has completed the upgrading and resumed trial production from its upgraded DRI facilities. China Huaxin is currently doing
the equipment debugging and adjustments, and expects to resume official production in mid-2017.

There was no production
and sales for the three months ended March 31, 2017 and 2016.

Cost of Goods
Sold

Cost of goods
("COGS”) sold consists primarily of fuel, power, direct material, direct labor, depreciation of production plant items
and equipment, and accrual of the mining rights, which are attributable to the production of iron ore, iron ore concentrate and
DRI.

COGS for the three
months ended March 31, 2017 and 2016 was $0 due to the absence of sales and production.

Gross Income
(Loss)

We did not have
any sales and production for the three months ended March 31, 2017 and 2016.

Operating Expenses

Operating expenses
consist mainly of employee salaries and welfare, business meeting and promotion expense, depreciation and amortization of items
not associated with production, utilities, and audit and legal expenses.

Operating
expenses were $1,009,565 for the three months ended March 31, 2017, compared to $1,007,404 for the same period in
2016, an increase of $2,161 or 0.2%; despite we had stock compensation expense of $131,250 for shares issued for consulting
service in the three months ended March 31, 2017, we actually incurred less operating expenses for salary and welfare expenses,
marketing and business entertainment expenses during the three months ended March 31, 2017 as a result of the company’s cost
saving efforts.

Other
expenses were $291,080for the three months ended March 31, 2017,
compared to $267,870 for the 2016 period. The 9% increase in other expenses was mainly due to the loss on disposal
of certain obsolete construction in progress of $40,081 for China Jinxin for the three months ended March 31, 2017.

Net Loss

We had a net loss of $1,298,146 for
the three months ended March 31, 2017, compared to net loss of $1,267,062 for the three months ended March 31, 2016. The increase
in our net loss results from the increased operating and other expenses.

Liquidity and Capital Resources

Our ability to
generate cash from operations is dependent upon our ability to obtain iron ore and iron sands to process and to maintain the permits
necessary to process such ore at our current facilities, neither of which is assured. If we cannot obtain iron ore and iron sands
to process or are no longer able to process ore and sands, we would be dependent upon cash infusions from our current
shareholders or third parties in the form of loans or equity contributions, or a combination thereof, to maintain our facilities
until we can resume operations. One shareholder has indicated she will continue to fund China Jinxin, although there is no written
agreement in place and China Jinxin currently owes her $10.19 million. In addition, China Huaxin borrowed $24.17 million from three
of our shareholders (one of whom is the individual who funded China Jinxin and who has loaned $16.52 million to China Huaxin, another
of whom is our CEO and who has loaned $2.05 million, and the third of whom is a shareholder and senior officer who has loaned
$5.59 million). Despite such commitments, there is no assurance adequate cash will be available from current shareholders or from
third parties and, if it is available, what the terms of any loan or investment might be. If we are unable to obtain the funding
required, we may have to curtail or cease our operations. We have no specific plans, understandings or agreements with respect
to the raising of such funds, and we may seek to raise the required capital by the issuance of equity or debt securities or by
other means. Since we have no such arrangements or plans currently in effect, our inability to raise funds may have a severe negative
impact on our ability to become a viable company.

Other than current
construction in progress, which will be funded by one of our shareholders, we do not anticipate significant cash expenditures in
the immediate future on our current production facilities. Nevertheless, we may require working capital once we resume production
at our facilities. Certain of our shareholders have verbally agreed to continue to provide cash to satisfy our working capital
needs. However, in the future, we intend to continue the expansion of operations by acquiring new production facilities and mines.
The acquisitions will be paid for with cash or our equity securities, or combinations of both. Failure to obtain such financing
could have a material adverse effect on our business expansion. The issuance and sale our equity securities would dilute the interest
of our current shareholders. Further, there is no guarantee of the terms on which such an issuance would occur, if at all, or whether
such terms would be favorable to our current shareholders.

As of March 31,
2017, cash and equivalents were $23,779, compared to $86,519 cash and equivalents as of December 31, 2016. The following is a summary
of cash provided by or used in each of the indicated types of activities during the three months ended March 31, 2017 and 2016,
respectively.

2017

2016

Net cash used in operating activities

$

(317,657

)

$

(129,119

)

Net cash provided by (used in) investing activities

$

(1,002

)

$

14,091

Net cash provided by financing activities

$

255,352

$

177,827

Net cash used in operating activities

Net cash used in operating activities was $317,657 for the three months ended March 31, 2017, compared
to net cash used in operating activities of $129,119 in the same period of 2016. The increase of cash outflow from operating activities
for the three months ended March 31, 2017 was principally attributable to increased cash outflow from accounts payable of $71,236
for the three months ended March 31, 2017, compared with cash inflow from accounts payable of $50,317 for the same period of 2016;
decreased cash inflow from accrued liabilities and other payables of $235,479 for the three months ended March 31, 2017, compared
with cash inflow from accrued liabilities and other payables of $454,611 for the same period of 2016; despite the increased cash
inflow from restricted cash of $86,226 for the three months ended March 31, 2017, compared with cash inflow from restricted cash
of $0 for the same period of 2016.

Net cash used in investing activities was $1,002 for the three
months ended March 31, 2017, compared to cash provided by investing activities of $14,091 for the same period in 2016. During the
three months ended March 31, 2017, we had cash inflow of $95,018 for restricted cash and cash outflow of $1,002 for acquisition
of fixed assets. During the three months ended March 31, 2016, we had cash inflow of $14,091 for advance to suppliers for construction
and equipment.

Net cash provided by financing activities

Net cash provided by financing activities was $255,352 for the three months ended March 31, 2017, compared
to net cash provided by financing activities of $177,827 in the same period of 2016. The net cash provided by financing activities
in the three months ended March 31, 2017 was due to advances from related parties of $255,352, compared with cash inflow from
advances from related parties of $177,827 for the same period of 2016.

At March
31, 2017, we had a working capital deficit of $51.84 million, a decrease in deficit of $0.15 million from the deficit at
December 31, 2016 of $51.99 million, which was mainly from increased prepaid expense.

As of March 31,
2017, China Jinxin had borrowed $10.19 million from one of its shareholders for working capital and production facility construction
needs. The loan of $10.19 million will not bear interest prior to the commencement of
production pursuant to an amended loan agreement entered on January 16, 2013. Commencing on the production date, interest will
begin to accrue at the bank's annual interest rate on certificates of deposit at that time on the amount outstanding from time
to time and all amounts inclusive of accrued interest is to be repaid within three years of our commencement of production at the
Zhuolu Mine. China Huaxin borrowed $24.17 million from three shareholders; of the $24.17 million, $6.91 million has
an interest rate of 10% with a due date of the 6th month anniversary of the date of official production. The remaining
payables bear no interest, and are payable upon demand. In addition, China Huaxin borrowed $5.02 million from certain
companies owned by its major shareholder, which bear no interest and are payable upon demand.

Contractual Obligations

We have certain
fixed contractual obligations and commitments in respect of which we estimate future payments. Changes in our business needs, cancellation
provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide
certainty regarding the timing and amounts of payments. We present below a summary of the most significant assumptions used in
our determination of amounts presented in the tables, in order to assist in the review of this information within the context of
our consolidated financial position, results of operations, and cash flows.

The following
table summarizes our contractual obligations as of March 31, 2017, and the effect these obligations are expected to have on our
liquidity and cash flows in future periods.

We have not entered
into any financial guarantees or other commitments to guarantee the obligations of any third parties. We have not entered into
any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected
in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred
to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable
interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing,
hedging or research and development services with us.

Critical Accounting Policies
and Estimates

Our management's
discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements,
which were prepared in accordance with US GAAP. While our significant accounting policies are more fully described in Note 2 to
our consolidated financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding
and evaluating this management discussion and analysis.

Emerging Growth Company

On April 5, 2012,
the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements
for qualifying public companies. As an “emerging growth company,” we may, under Section 7(a)(2)(B) of the Securities
Act, delay adoption of new or revised accounting standards applicable to public companies until such standards would otherwise
apply to private companies. We may take advantage of this extended transition period until the first to occur of the date that
we (i) are no longer an "emerging growth company" or (ii) affirmatively and irrevocably opt out of this extended transition
period. We elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore
not be comparable to those of companies that comply with such new or revised accounting standards. Until the date we are no longer
an "emerging growth company" or affirmatively and irrevocably opt out of the exemption provided by Securities Act Section
7(a)(2)(B), upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different
effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth
companies and the date on which we will adopt the recently issued accounting standard. The Jobs Act also provides exemption
from auditor reporting on the Company’s Internal Control Over Financial reporting as required by section 404(b) of the Sarbanes
Oxley Act of 2002.

Basis of Presentations

Our financial
statements are prepared in accordance with US GAAP and the requirements of Regulation S-X promulgated by the Securities and Exchange
Commission (“SEC”).

Going Concern

We incurred net
losses of $1.30 million for the three months ended March 31, 2017. We also had a working capital deficit of $51.84 million as of
March 31, 2017. In addition, we have refused to sell our iron ore concentrate to our sole customer because of the low price offered
for our product. The price of iron ore concentrate is still in decline. These conditions raise substantial doubt as to whether
we can continue as a going concern. The financial statements do not include any adjustments that might result from the outcome
of this uncertainty. One shareholder has indicated she will continue to fund China Jinxin, though there is no written agreement
in place and the Company currently owes $10.19 million to the shareholder. In addition, China Huaxin borrowed $24.17 million from
three shareholders, and borrowed $5.02 million from certain companies owned by its major shareholder. Despite such commitments,
there is no assurance that adequate cash will be available from current shareholders or from third parties and, if it is available,
what the terms of any loan or investment might be. If we are unable to obtain the funding required, we may have to curtail or cease
our operations. The Company has no specific plans, understandings or agreements with respect to the raising of such funds, and
it may seek to raise the required capital by the issuance of equity or debt securities or by other means. Since it has no such
arrangements or plans currently in effect, its inability to raise funds may have a severe negative impact on its ability to become
a viable company.

In preparing financial
statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported
amounts of revenues and expenses during the reporting period. Significant estimates, required by management, include the recoverability
of long-lived assets, allowance for doubtful accounts, and the reserve for obsolete and slow-moving inventories. Actual results
could differ from those estimates.

Revenue Recognition

The Company’s
revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (“SAB”) 104 (codified in FASB ASC
Topic 605). Sales are recognized when a formal arrangement exists, which is generally represented by a contract between the Company
and the buyer; the price is fixed or determinable; title has passed to the buyer, which generally is at the time of delivery; no
other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are recorded as unearned revenue.

Sales were the
invoiced value of iron ore and iron ore concentrate, net of value-added tax (“VAT”). All of the Company’s iron
ore concentrate sold in the PRC is subject to a VAT of 17% of the gross sales price. This VAT may be offset by VAT paid by the
Company on raw materials and other materials included in the cost of producing the finished product. The Company records VAT payable
and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the
receivables. Sales and purchases are recorded net of VAT collected and paid as the Company acts as an agent for the government.

The Company uses
FASB ASC Topic 220, “Comprehensive Income”. Comprehensive income is comprised of net income and all changes to the
statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions
to stockholders.

Foreign Currency Translation
and Comprehensive Income (Loss)

The functional
currency is the Renminbi (“RMB”). For financial reporting purposes, RMB were translated into United States Dollars
(“USD” or “$”) as the reporting currency. Assets and liabilities are translated at the exchange rate in
effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting
period.

Translation adjustments
arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity
as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency transactions are included
in income. There has been no significant fluctuation in the exchange rate for the conversion of RMB to USD after the balance sheet
date.

The fluctuation
of exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue
to take place either through the People’s Bank of China (“PBOC”) or other banks authorized to buy and sell foreign
currencies at the exchange rate quoted by the PBOC.

The Company uses
FASB ASC Topic 220, “Comprehensive Income”. Comprehensive income is comprised of net income and all changes
to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and
distributions to stockholders.

Disclosures about
segments of an enterprise and related information require use of the “management approach” model for segment reporting,
codified in FASB ASC Topic 280. The management approach model is based on the way a company's management organizes segments
within the company for making operating decisions and assessing performance. Reportable segments are based on products
and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.

FASB ASC Topic
280 has no effect on the Company’s financial statements as substantially all of its operations are conducted in one industry
segment – iron ore refining.

Recent Accounting Pronouncements

In August 2014, the Financial Accounting
Standards Board (“FASB”) issued Presentation of Financial Statements — Going Concern. This standard requires
management to evaluate for each annual and interim reporting period whether it is probable that the reporting entity will not be
able to meet its obligations as they become due within one year after the date that the financial statements are issued. If the
entity is in such a position, the standard provides for certain disclosures depending on whether or not the entity will be able
to successfully mitigate its going concern status. This guidance is effective for annual periods ending after December 15, 2016
and interim periods within annual periods beginning after December 15, 2016. Early application is permitted. The Company does not
anticipate that this adoption will have a significant impact on its CFS.

In July 2015, the FASB issued Accounting
Standards Update (“ASU”) No. 2015-11, Inventory, which requires an entity to measure inventory within the scope at
the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business,
less reasonably predictable costs of completion, disposal, and transportation. The effective date for the standard is for fiscal
years beginning after December 15, 2016. Early adoption is permitted. The Company does not anticipate that this adoption will have
a significant impact on its CFS.

In September 2015, the FASB issued ASU
No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. To simplify the
accounting for adjustments made to provisional amounts recognized in a business combination, the amendments eliminate the requirement
to retrospectively account for those adjustments. For public business entities, the amendments are effective for fiscal years beginning
after December 15, 2015, including interim periods within those fiscal years. For all other entities, the amendments in this update
are effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December
15, 2017. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date
with earlier application permitted for financial statements that have not been issued. The Company does not anticipate that this
adoption will have a significant impact on its CFS.

In May 2014, the FASB issued No. 2014-09,
Revenue from Contracts with Customers, which supersedes the revenue recognition requirements in Accounting Standards Codification
605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity
recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods or services. In August 2015, the FASB approved a one-year
deferral of the effective date of the new revenue recognition standard. Public business entities, certain not-for-profit entities,
and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December
15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual
reporting periods beginning after December 31, 2016, including interim reporting periods within that reporting period. In March
2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606), Principal versus Agent Considerations (Reporting
Revenue versus Net). In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606), Identifying
Performance Obligations and Licensing. In May 2016, the FASB issued ASU 2016-11, Revenue from Contracts with Customers (Topic 606)
and Derivatives and Hedging (Topic 815) - Rescission of SEC Guidance Because of ASU 2014-09 and 2014-16, and ASU 2016-12, Revenue
from Contracts with Customers (Topic 606) - Narrow Scope Improvements and Practical Expedients. These ASUs clarify the implementation
guidance on a few narrow areas and adds some practical expedients to the guidance Topic 606. The Company is evaluating the effect
that these ASUs will have on its CFS.

On March 30, 2016, the FASB issued ASU
No. 2016-09, Improvements to Employee Share-Based Payment Accounting, which includes amendments to accounting for income taxes
at settlement, forfeitures, and net settlements to cover withholding taxes. The amendments in ASU 2016-09 are effective for public
companies for fiscal years beginning after December 31, 2016, and interim periods within those annual periods. Early adoption is
permitted but requires all elements of the amendments to be adopted at once rather than individually. The Company is evaluating
the effect that ASU No. 2016-09 will have on the Company’s CFS.

In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets
held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. This replaces
the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized
cost. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2019. Early application will be permitted for all entities for fiscal years, and interim periods within those fiscal years, beginning
after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its CFSs.

In August 2016, the FASB issued ASU No.
2016-15, Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 clarifies the presentation and classification of
certain cash receipts and cash payments in the statement of cash flows. This ASU is effective for public business entities for
fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted. The Company
is currently assessing the potential impact of ASU 2016-15 on its CFS.

In October 2016, the FASB issued ASU No.
2016-16—Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This ASU improves the accounting
for the income tax consequences of intra-entity transfers of assets other than inventory. For public business entities, the amendments
in this update are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods
within those annual reporting periods. Early adoption is permitted. The Company does not anticipate that the adoption of this ASU
will have a significant impact on its CFS.

In October 2016, the FASB issued ASU No.
2016-17 Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control. This update amends the
consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat
indirect interests in the entity held through related parties that are under common control with the reporting entity when determining
whether it is the primary beneficiary of that VIE. This ASU is effective for public business entities for fiscal years beginning
after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted. The Company does not
anticipate that the adoption of this ASU will have a significant impact on its CFS.

In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash. The guidance requires that a statement of cash flows explain the change
during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash
equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with
cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash
flows. The standard is effective for fiscal years beginning after December 15, 2017, and interim period within those fiscal
years. Early adoption is permitted, including adoption in an interim period. The standard should be applied using a retrospective
transition method to each period presented. The Company does not anticipate that the adoption of this ASU will have a significant
impact on its CFS.

In January 2017, the FASB issued ASU No. 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with
the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions
or disposals of assets or businesses. The standard is effective for fiscal years beginning after December 15, 2017, including
interim periods within those fiscal years. Early adoption is permitted. The standard should be applied prospectively on or after
the effective date. The Company will evaluate the impact of adopting this standard prospectively upon any transactions of acquisitions
or disposals of assets or businesses.

In January 2017, the FASB issued ASU 2017-04,
Simplifying the Test for Goodwill Impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical
purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds
its fair value, not to exceed the carrying amount of goodwill. The guidance should be adopted on a prospective basis for the annual
or any interim goodwill impairment tests beginning after December 15, 2019. Early adoption is permitted for interim or annual
goodwill impairment tests performed on testing dates after January 1, 2017. The Company is currently evaluating the impact
of adopting this standard on its CFS.

As of December 31, 2016, there is no
other recently issued accounting standards not yet adopted that would have a material effect on the Company’s CFS.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures.

Management of Adamant DRI Processing and
Minerals Group is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required
to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 (the “Exchange
Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s
rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated
to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required financial and other required disclosures.

At March 31, 2017, an evaluation of the
effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange
Act of 1934 (the “Exchange Act”)) was carried out under the supervision and with the participation of our Chief Executive
Officer and our Chief Financial Officer. Based on their evaluation of our disclosure controls and procedures, they concluded that
at March 31, 2017, such disclosure controls and procedures were not effective. This was due to our limited resources,
including the absence of a financial staff with accounting and financial expertise and deficiencies in the design or operation
of our internal control over financial reporting that adversely affected our disclosure controls and that may be considered to
be “material weaknesses.”

We plan to designate individuals responsible
for identifying reportable developments and to implement procedures designed to remediate the material weakness by focusing additional
attention and resources in our internal accounting functions. However, the material weakness will not be considered remediated
until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that
these controls are operating effectively.

(b) Changes in Internal Control over Financial Reporting.

There have been no changes in our internal control over
financial reporting that occurred during our fiscal quarter ended March 31, 2017 that have materially affected, or are reasonable
likely to materially affect, our internal control over financial reporting. Given the limitations of our accounting personnel,
we need to take additional steps to ensure that our financial statements are in accordance with US GAAP.

PART II

OTHER INFORMATION

Item 1A – Risk Factors.

The purchase of our common stock involves
a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described under the
heading “Risk Factors” in Item 1A. of our Annual Report on Form 10-K for the year ended December 31, 2016 (the “2016
Form 10-K”) and “Management's Discussion and Analysis of Financial Condition and Results of Operations” set forth
in Item 2 of Part I of this report and our consolidated financial statements and related notes included in Item 1 of Part
I of this report. Readers should carefully review those risks, as well as additional risks described in other documents we
file from time to time with the SEC.

Except as otherwise disclosed in “Management's Discussion
and Analysis of Financial Condition and Results of Operations” set forth in Item 2 of Part I of this report and
our consolidated financial statements and related notes included in Item 1 of Part I of this report, there have been no material
changes in the risk factors previously disclosed in the 2016 Form 10-K.

Item 6 - Exhibits

The following exhibits are filed with this amendment to this
report:

31.1

Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

31.2

Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.

32.1

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema

101.CAL

XBRL Taxonomy Extension Calculation

101.DEF

XBRL Taxonomy Extension Definition

101.LAB

XBRL Taxonomy Extension Label

101.PRE

XBRL Taxonomy Extension Presentation

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.